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COST OF LIVING

Why (and when) double-digit inflation is set to hit Austria

Financial experts in Austria do not expect inflation to slow down any time soon. In fact, they are predicting the opposite. Here's what you need to know.

Why (and when) double-digit inflation is set to hit Austria
The high cost of living is the biggest concern for international residents in Austria right now, according to the latest survey by The Local. (Photo by Markus Spiske / Pexels)

In a recent interview, inflation expert Josef Baumgartner forecast that inflation in Austria will hit double-digits in the coming months.

Baumgartner, from the Austrian Institute of Economic Research (WIFO), told Kurier that residents in Austria should prepare themselves for an ongoing increase in inflation due to rising energy prices.

Baumgartner said: “We’re a long way from the all-clear. According to the announcements by Wien Energie and EVN, I expect an inflation rate of more than ten percent by September, and no later than April 2023.”

FOR MEMBERS: EXPLAINED: What is Austria’s ‘Tax Freedom Day’?

The latest estimate by Statistics Austria shows inflation was already at 9.2 percent in July, as reported by The Local.

This is in stark contrast to predictions made by the European Central Bank earlier this year when it was expected that inflation would fall in the second half of 2022.

How expensive could energy in Austria become?

WIFO expert Baumgartner based his forecast for Austria on wholesale electricity prices, which are currently 247 percent higher than in August 2021, reports ORF

Baumgartner said: “If the energy suppliers pass this on one-to-one, there is a risk of an enormous price increase.”

Additionally, Baumgartner expects prices for electricity and gas to go up by a further 50 percent in September, and was not optimistic that the planned nationwide electricity price cap will be enough to dampen energy prices.

READ MORE: Cost of living: How to save money on energy bills in Austria

He added that federal government intervention must go further to tackle gas and district heating prices.

On August 3rd, EVN and Wien Energie – both part of the Energieallianz Austria (EAA) group – announced they will be increasing energy prices from September.

EVN (which is mostly state-owned) blamed the move on price increases on the international wholesale markets.

According to ORF, Baumgartner believes these planned price increases will further impact the customer price index and push up inflation across Austria, even if the tariff changes only apply to customers in the east of the country.

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ENERGY

UPDATED: Will Austria have enough gas for this winter?

Austria's gas storage tanks are filling up as gas consumption remains low. Here's what it means for the coming winter season.

UPDATED: Will Austria have enough gas for this winter?

On Tuesday, Austria’s Climate Ministry confirmed the country’s gas storage tanks are now 80 percent full. 

The milestone was reached one month ahead of schedule and the amount is equivalent to the country’s average gas usage during a winter season.

Austria reached the target amount after more Russian gas flowed into the country than is currently being consumed, which means the storage levels will continue to increase.

READ ALSO: Energy costs: Vienna to support 200,000 households with up to €500

In a statement, Chancellor Karl Nehammer said: “We pulled out all the stops to fill our large storage facilities and create this security of supply. 

“Today, we can say we are well prepared. Our storage facilities are 80 percent full and continue to fill up.”

Nehammer also confirmed that Austria’s dependence on Russian gas has been reduced from 80 percent to 50 percent, reports the Kronen Zeitung.

But despite the good news, Energy Minister Leonore Gewessler (Greens) said the situation “remains tense”, adding that Russia is not a “reliable counterpart”.

Earlier this year, the Austrian Federal Government set the 80 percent target to ensure the gas supply for the winter months amid fears the gas supply could be disrupted.

FOR MEMBERS: READER QUESTION: When should I turn on my heating in Austria this year?

Even the storage facility at Haidach (the Salzburg-Upper Austrian site that borders Bavaria in Germany) is filling up after RAG, the largest gas storage operator and energy storage company in Austria, overtook management in August. Previously, Haidach was managed by Russia’s Gazprom unit and the facility had not been refilled since last winter.

This is good news for Austria as Tyrol and Vorarlberg’s gas supply comes from Bavaria, reports Der Standard.

How much gas can Austria store?

Austria can store 90 terrawatt hours (TWh) of gas when the storage tanks are full.

READ ALSO: ‘Mission 11’: Austrian government reveals tips on how to save energy and fuel

However, only around half of the gas stored in Austria is for domestic consumption because gas for Slovenia and Germany is stored in Austria. 

According to ORF, Austria recorded 77 TWh of gas in storage on October 2nd. Last winter, Austria’s gas consumption from October 2021 to March 2022 was around 65 TWh.

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